TEHRAN: PresidentHassan Rouhani yesterday unveiled Iran's first annual budget since the returnof US sanctions, saying it had been adjusted to take account of Washington's"cruel" measures. The president announced a 20 percent increase inpublic sector wages in a sign of the economic challenges the Islamic republichas faced since the United States pulled out of the 2015 nuclear deal earlierthis year. The speech gave only a few general points of the budget -- whichwill now be scrutinized and voted on by parliament -- but acknowledged thepressure Iran was under.
"Last yearwe faced some problems," Rouhani told parliament in a televised speech,referring to the widespread protests that hit the country almost exactly a yearago, sparked by anger over economic and political conditions. "Thoseevents caused the Americans to change their position regarding the Islamicrepublic and the nuclear deal," he said. "The real objective of theUS in all of this conspiracy and sanction and pressure... is to bring thepowerful Islamic republic of Iran to its knees," he said, vowing that theUS "will definitely be defeated." The renewed US sanctions include anembargo on Iran's crucial oil sector.
The new budgetdid not say how many barrels of oil Iran hopes to sell in the next financialyear, which starts in late March, but analysts believe it will be considerablyless than the approximately 2.5 million it sold per day prior to Trump'swithdrawal. The US granted waivers toeight key buyers of Iranian oil -- including China, India and Turkey -- thoughthis has been a double-edged sword for Iran since it also helped push down theglobal price.
Forex'practically zero'
Rouhani came topower in 2013 representing the more moderate side of Iran's ruling elite,hoping a compromise on the country's nuclear program would reduce tensions withthe West and allow foreign investment to boost the stunted private sector. Thereturn of sanctions has ended that hope, and forced Rouhani more towards theself-sufficient "resistance economy" preferred by supreme leaderAyatollah Ali Khamenei.
Concern over theeconomy pushed many Iranians to secure their savings in dollars and gold,triggering a run on the Iranian rial, which has lost around half its valuesince Trump announced the pullout. "At one point early this year ourforeign exchange cash reserve was practically zero, forcing the government totake hard decisions to save the country," Rouhani told parliament. The governmenthas pressured exporters to return their dollars to Iran, and Rouhani said theywould lose tax incentives if they failed to repatriate their cash.
The central bankhas used the returning dollars to shore up the collapsing rial, which hasrecovered to around 110,000 per dollar on unofficial exchanges. The rial's falldrove up prices across the board, with food and drink costs up 60 percent inthe year to November according to the central bank. The judiciary launched afierce crackdown on currency speculators, dubbed "economicdisruptors" that has seen dozens of traders put on trial and at leastthree businessmen executed.
The so-called"sultan of coins", Vahid Mazloomin, was hanged in October after beingfound guilty of amassing two tons of gold coins. But sanctions and fraud areonly part of the story in an economy with many long-standing problems. Its banking sector is riddled with bad loans,while many key industries from oil and gas to construction are dominated bysemi-state groups with opaque links to the government and military. The budgetwas delayed several times in recent weeks, with reports that Khamenei haddemanded unspecified changes to the final document. - AFP